Location and scale
Location and relocation
- Location = choosing a place; relocation = moving to a new one.
- quantitative factors — measurable in money (rent, wages, transport, grants).
- qualitative factors — harder to measure (worker skills, nearness to customers, owner's wishes).
- Offshoring = moving production abroad (lower wages, new markets, fewer rules) — but longer supply lines and culture risks.
Practice
Which is a quantitative location factor?
Quantitative factors are measurable in money (rent, wages); qualitative ones are harder to measure.
Practice
Offshoring is:
Offshoring moves production abroad — often for lower wages or new markets.
Optimum scale
- As a firm grows, average cost falls (economies of scale) then rises (diseconomies of scale).
- The optimum scale is the size where the average cost per unit is lowest.
- A firm should grow up to its optimum scale, but not beyond.
Practice
The optimum scale of operation is the size where:
The optimum scale minimises average cost per unit — past it, diseconomies of scale raise costs.
You've got it
Key idea
- location balances quantitative (money) and qualitative (skills, nearness) factors
- offshoring = producing abroad for lower cost, with supply-chain and culture risks
- the optimum scale = lowest average cost per unit (grow up to it, not past it)